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Tuesday, March 7, 2017

Parity Is The Answer To America’s Agricultural Crisis

Farming is, by nature, an up and down game, with so many variables going into the production of food that can drive both prices and production. Throughout American and, indeed, world history, agriculture has been susceptible to the climate, weather, human action, war, and economic policy. But, for all history, one thing has remained constant: the fact that human society totally depends on the ability of farmers to produce food. It is quite a simple realization but a powerful one. The death of the farmer is the death of humanity as a whole.

In the United States, since the early 1900s, the entire country has experience various farm crises – some as a result of weather and climate disasters but mostly as a result of governmental policy, i.e. the inability of the U.S. government to ensure that farmers actually have an incentive to produce food.

America made it through the Dust Bowl and the Great Depression and still lived to establish perhaps the greatest or near greatest fair agricultural system in the world . . . until the mid-1950s when that system was ended with the advent of the 1980s farm crisis and a series of events that has seen big banks and big corporations take the place of family farmers, a process that is continuing to this day. In 2017, American farming is in the worst shape of American history.

Although a food revolution is admittedly taking place at the grassroots level (an attempt to produce good, clean, non-GMO, natural food at a local and small level), in terms of who provides the average meal to the average American, Big Ag has an undeniable monopoly. Farmers who attempt to survive under the yoke of Big Ag find themselves creating massive profits for the corporate vampires while surviving off government (taxpayer) subsidies. Low “market prices” bring in little revenue while high costs have many farmers living in the red, even if they are not concerned with the quality of the food or whether or not it is natural. Despite low market prices being fetched by the farmer, consumers are still seeing their food costs rise every year.

Clearly, the practice of subsidies is a poor one that is neither sustainable nor desirable. Keeping farmers essentially “on the dole” and at subsistence levels cannot continue to be the policy of a First World nation in the 21st Century. But simply eliminating subsidies and allowing agriculture and food to become just another product on the market is even worse, particularly now that the market is controlled by Big Ag and Wall Street.

Between 1935 and 2014, a period where the U.S. population more than doubled, the amount of farms in existence decreased three times over. In 1935, there were 6.8 million farms and 127 million Americans (1 farm for every 19 Americans). In 2014, there were fewer than 2.2 million farms for 313 million Americans (just 1 farm for every 142 Americans). In 1935, farming was 21% of the American labor force. In 2014, it was 0.7%.

In 1935, the average farm was 154.8 acres but, in 2014, it was 418. The reason for this is simple: as major agricultural companies took over American agriculture, corporate farming became the norm, requiring larger numbers of acres for massive operations. While, in terms of percentage, the biggest farms are smallest in number (as stands to reason), they make up for the majority of the market in terms of sales with 70% of farms not producing a livable income.

Wall Street has also compounded the problem by the practice of unregulated “commodity speculation” or, essentially, betting on the price of food. In short, “commodity speculation” as it relates to food is the practice of betting on the price of specific foods in the future and locking in the wager early on. Speculation thus tends to raise the price of food every year with the odd moments of lowering prices at times when it seems the worst time possible for farmers for prices to drop. The latter possibility is incredibly rare, however, and speculation has tended to raise the cost of food every year. It enriches no one but bankers. Farmers and consumers pay all the cost of production, distribution, and consumption while massive corporations and banks reap the profits.

The answer to all of this is Parity.

Parity

Parity as an agricultural policy has been ignored for so long that most modern-day farmers have no idea what it even is, much less that it was perhaps the most successful policy of its type in modern American history. Indeed, only older farmers or those educated on agricultural policy seem to be even slightly aware of it. This is not by mistake.

Currently, not only does Big Ag makes millions of dollars in profit and maintain a virtual monopoly on the American food supply, but Wall Street is able to fleece farmers and consumers as well. Big Ag (in concert with Wall Street) has seen millions of family farmers disappear and become replaced with major farming operations that use GMO and hybrid patented technologies and who are beholden to major international agricultural corporations.

As it stands, food prices are determined by the “market,” only they aren’t really determined by the market so much as they are determined by the commodities futures markets. Here, the prices are manipulated up or down by speculators.

While profits have gone sky high for Wall Street commodities speculators, prices paid to farmers have actually been driven down. So here one can easily see the scam that is the current American agricultural economy – Big Ag sits off to the side while “franchise” farmers do most of the work. These farmers get paid oftentimes well below what it costs to actually produce the food. The American taxpayer (the consumer) thus pays subsidies to the farmer via tax money so the farmer can survive. As a result of all this, Wall Street speculators sit back and get fatter while the farmer and the consumer pay more for less return. It’s nice work if you can get it.

What Is Parity?
Parity is essentially a minimum wage for farmers. It guarantees that farmers at least make more than it costs to produce various crops. Despite the fact that the parity system is no longer being implemented, the USDA continues to collect data regarding the costs of productions and calculates what would be the fair cost of production for specific crops. The calculation process is rather simple; it basically takes into consideration the costs of production (seed, land, tractor, fuel, etc.) and divides by the number of bushels that can be produced for these costs. That, essentially, is the parity cost.

Parity pricing is only a few short calculations away. Factoring in the above information along with commodity prices and purchasing power tied to a historical base period, a living wage, inflation, etc. parity pricing is achieved. In other words, a minimum or living wage for farmers is arrived through these calculations.

A Parity Economy In Today’s World
Parity was first introduced during the period of the New Deal where the U.S. Federal Government guaranteed the purchase of storable crops like rice, corn, wheat, and oats at or very near parity prices which had the effect of creating a minimum wage or living wage for farmers.

Today, farmers are only paid a fraction of parity for their crops. Going back to the year 2014, the National Agricultural Statistics Service reported that, at best, farmers only received 46% of parity for certain crops. Many crops were much lower than this amount. As you can easily see, farmers are only being paid half (at best) of what they need to earn a living. As a result, a system of subsidies was introduced which forces farmers to live on the government dole but still barely living at all. It should also be noted that, because of the structure of most Big Ag operations, major industrial multi-national food corporations suck up most of the subsidies. In addition, this form of subsidization causes consumers to pay twice for their food; once at the marketplace and again at tax time.

Parity would, of course, ensure that farmers are able to make a living wage and that the most important aspect of a national economy and population is safeguarded but it would also go great lengths toward breaking up multi-national operations, reducing farm size, returning farms back to real farmers and families, and encouraging the production of clean, natural, non-GMO food if implemented properly. It will also move toward diversifying American agriculture which is trending more and more toward monoculture, quite a dangerous direction for the country and for the rest of the world.

But Won’t Parity Increase Food Costs?
The answer to this question is somewhat more complicated. Some estimates suggest that food prices would rise up to about 15%. Others suggest the prices would end up being somewhere between current costs and organic costs. This is quite concerning considering inflation and the fact that food costs are already rising.

However, what these analysts forget to mention is that, as mentioned above, consumers are currently paying for their food twice; once at the market and again in food subsidies. They are paying twice because of the refusal of the “market” to ensure a living wage for farmers and because Wall Street is driving food prices up for the consumer but driving down prices well below parity for farmers.

That being said, parity pricing essentially eliminates the ability of Wall Street to manipulate and drive up the cost of food. During the period of 1942 and 1952, the commodity futures market in the United States essentially shut down due to parity pricing.

For instance, if there is a floor beyond which food prices cannot fall and a ceiling beyond which they cannot rise, the ability to gamble on the rise and fall of those prices is greatly diminished. In addition, a crackdown on commodity futures speculation would serve to eliminate any rise in prices. Thus, consumers would be paying about the same as they are now at the marketplace but farmers would be making a living wage. The living wage for farmers would then reduce the necessity of corporate farming and the reliance on Big Ag for agricultural products and bare subsistence level existence. It would also contribute to fewer GMOs and cleaner, local food.

There does, however, remain the question of a possible temporary price shock during the transition from subsidies to parity in the short period of time in which living wages are paid but while the last vestiges of commodity futures speculation continues. This price shock could be easily mitigated by a crackdown on those markets, banning and eliminating their ability to manipulate the prices of food. It would also be possible to temporarily continue a subsidy program redirected toward food companies that would be phased out as parity pricing comes into effect and as food speculation disappears.

The Economic Need For Parity
Parity pricing and agricultural policy in general effects more than farmers and even more than consumers as a whole. Income which flows into the various areas of the real economy – wages, salaries, corporate and small business income, rental properties, and virtually everything else – are generally balanced in stable ratios to each other. This, of course, makes sense and as technology changes and progress takes place these ratios change.

One simple example is that, to make a pencil, one needs wood, metal, and lead. The pencil requires the lumber industry which requires saws, trucks, and lumber yards which require metal saw blades and other machinery. All the workers require wages and each business exists for profit. All are connected.

Agriculture, however, is the base of the economy since it meets a basic need of humans to survive. People need to eat. Farmers produce food. Farmers need tools, tractors, trucks, labor, etc. The income that comes in to farms finds itself then being redistributed throughout the rest of the economy via both farm-related and nonfarm-related jobs.

But how can the rest of the economy operate when the base of that economy does not have enough money to survive and thus does not have enough money to pass on to the rest of the economy? Quite simply, it can’t. This is because the ratio of payment and income still exist whether farmers get paid a living wage or not. If farmers are earning a living wage, however, that money will find itself working its way throughout the rest of the real economy.

As Kyle McCarthy wrote, “When your food dollar goes to family farms it gets redistributed to labor, equipment and various other expenses and investments. When your dollar goes to Wall Street, it ends up in a Swiss bank account or up someone’s nose.”

Parity would not only benefit farmers and create more small farms, it would also increase the number of non-farm jobs and serve to revitalize many rural economies and small towns.

The Necessary Implementation of Parity In The 21st Century
Back in the 1980s, when many might remember the Farm Aid concerts becoming a yearly occurrence, the American farming crisis was beginning to make itself known at a public level. The Savings and Loan disaster was also another blunt reminder of the fact that corporations and banks were killing off the small family farmer and replacing him with corporate farms.

In 2017, small farmers, beyond niche markets (organic, co-ops, etc.) are virtually non-existent while corporate behemoths control the majority of America’s food supply. As major international corporations continue to dominate American agriculture, eliminate the diversity of nature, introduce environmentally destructive and toxic genetically modified crops as well as douse every plant possible with as much herbicide and pesticide as possible, the situation seems daunting and hopeless.

But the situation is not hopeless and our current dilemma can be reversed by implementing parity pricing, a ban on GMO food, and a concerted effort to break up the major monopolies and corporate giants that are currently controlling the American food supply. The answers to our agricultural problem already exist and have been proven effective in the past. It’s time to bring back parity.

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